| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Avenue Investment Management sees Canada undergoing a fundamental policy shift toward National Capitalism, driven by the economic wake-up call from aggressive US tariffs in 2025. This has catalyzed a dramatic increase in Canadian defense spending from current levels to 5% of GDP by 2035, alongside regulatory reform in the energy sector through federal-Alberta cooperation. The firm views this as creating substantial opportunities for high-quality industrial businesses like Toromont Industries, their holding since early 2023, which should benefit from elevated infrastructure investment. However, they express concern about global market risks, including US equity valuations at dot-com bubble levels with the S&P 500 trading at 30x earnings and record margin debt. The AI capital cycle, with technology sector spending rising from $100 billion in 2020 to over $400 billion expected in 2026, will inevitably drive returns lower as massive infrastructure investments depreciate. While optimistic about Canada's economic pivot, they remain cautious about broader market conditions and the dangerous trajectory of US National Capitalism policies.
Canada is experiencing a policy awakening driven by US tariff shock, pivoting toward National Capitalism with massive defense and infrastructure spending that will benefit high-quality industrial businesses, while global markets face elevated risks from extreme valuations and the unsustainable AI capital cycle.
The manager believes there are better days ahead for Canada as policy makers focus on national priorities and turn new policy initiatives into action. However, they express concern about the alarming direction of the United States with current administration's cronyism and coercion of corporate sector creating dangerous conditions.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Feb 5 2026 | 2025 Q4 | CAT, TIH.TO | AI, Canada, Defense Spending, energy, infrastructure, National Capitalism, tariffs, technology | TIH CN | Canada announced significant defense spending increases to reach 2% NATO target in 2026 and 5% of GDP by 2035, representing a potential sea change in investment levels. This shift from past decade of neglecting NATO spending requirements creates substantial infrastructure investment opportunities. Canada is prioritizing key infrastructure investments including energy sector regulatory reform and defense-related infrastructure. The government is working with Alberta on energy infrastructure including pipelines, rail, power generation, and transmission grid to unlock natural resource production. Global shift towards National Capitalism where governments actively prioritize national economic interests over global integration, using tools like tariffs, subsidies, and industrial policy to support domestic production. This represents movement away from market-based economies toward greater state intervention. US tariffs announced in early 2025 pushed average tariff rates to levels not seen in over 100 years. Tariffs are expected to remain elevated and permanent reality for global economy, creating distorting impacts on global trade and financial markets. Technology sector capital spending has increased from $100 billion in 2020 to over $400 billion expected in 2026 due to AI data center investments. This massive capital cycle will drive returns on capital lower in technology sector as infrastructure investments depreciate over 5-8 years. Canadian energy sector positioned to benefit from regulatory reform and government cooperation with Alberta. US military action in Venezuela aimed at accessing oil sector, with administration asking US energy companies to invest $100 billion in Venezuelan infrastructure. |
| Oct 16 2025 | 2025 Q3 | - | Debt, gold, inflation hedge, Precious Metals, Royalty Companies |
OR WPM |
Avenues letter centers on golds historic rise above $4,000/oz in 2025, attributing it to unsustainable government debt and central bank accumulation. The firms 22-year gold strategy focuses on royalty companies like Osisko and Wheaton Precious Metals, offering stable, long-duration cash flows. It expects inflationary fiscal responses to global debt pressures to sustain gold and silver strength. |
| Jul 23 2025 | 2025 Q2 | - | capital efficiency, inflation, intangible assets, Pricing Power, returns | - | The letter uses Warren Buffetts framework to analyze how inflation disproportionately harms asset-heavy businesses while favoring companies with strong intangible assets and pricing power. Management applies this lens to portfolio holdings, emphasizing capital-light business models that generate high returns on invested capital. The outlook favors businesses structurally advantaged in an inflationary environment. |
| Apr 15 2025 | 2025 Q1 | - | - | - | |
| Jan 27 2025 | 2024 Q4 | - | - | - | |
| Oct 18 2024 | 2024 Q3 | - | - | - | |
| Jul 15 2024 | 2024 Q2 | - | - | - | |
| Apr 15 2024 | 2024 Q1 | - | - | - | |
| Jan 15 2024 | 2023 Q4 | - | - | - | |
| Oct 16 2023 | 2023 Q3 | - | - | - | |
| Jul 18 2023 | 2023 Q2 | - | - | - | |
| Apr 14 2023 | 2023 Q1 | - | - | - | |
| Jan 17 2023 | 2022 Q4 | - | - | - | |
| Oct 17 2022 | 2022 Q3 | - | - | - | |
| Jul 15 2022 | 2022 Q2 | - | - | - | |
| Apr 14 2022 | 2022 Q1 | - | - |
OR WPM |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
Defense SpendingThe entire world is rapidly rearming off an extremely low base of defense spending. This exposure focuses on companies that make armaments for nation state security and materially outperformed for the year. |
Defense Armaments Rheinmetall Palantir RTX | |
EnergyEnergy plays a critical role in AI infrastructure economics, with data centers becoming major electricity consumers. Rising power costs compress margins while grid constraints and regulatory scrutiny influence deployment timelines. The manager emphasizes that unlike software-driven growth, AI compute cannot be scaled independently of physical energy reality. |
Data Centers Grid Power Infrastructure Utilities | |
Industrial PolicyGlobal shift towards National Capitalism where governments actively prioritize national economic interests over global integration, using tools like tariffs, subsidies, and industrial policy to support domestic production. This represents movement away from market-based economies toward greater state intervention. |
Tariffs Subsidies Protectionism Nationalism Intervention | |
Infrastructure SpendingPlaying on the continued theme of infrastructure spending, defense and energy sustainability, positions in Industrial and Energy sectors including Oshkosh, Coterra, OSI Systems, and Herc Holdings added positively to performance. |
Defense Energy Industrial Government Sustainability | |
Trade PolicyRecent tariff policies continued to negatively impact U.S. consumers and companies throughout the year. However, international companies have been finding new trade arrangements and growth opportunities, benefiting from shifts in global trade patterns as the new U.S. administration alters terms of international cooperation. |
Tariffs International Growth Cooperation Impact | |
| 2025 Q3 |
GoldGold returned +65% in dollars in 2025, driven by broadening demand from central banks, professional and retail investors. Central banks now hold 24% of reserves in gold versus 23% in US Treasuries for the first time. Maintained 12% portfolio allocation throughout the year. |
Central Banks Reserves Diversification Demand |
| 2025 Q2 |
InflationInflation has continued to be a persistent feature in Japan and has prompted changes in both corporate and consumer behavior. Importantly, inflation has fed through to corporate earnings and equity performance. Companies that have successfully passed on higher costs to consumers have benefited from improved operating margins. |
Inflation Corporate Earnings Operating Margins Consumer Behavior Cost Pass-through |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct 16, 2025 | Fund Letters | Bryden Teich | OR | Osisko Gold Royalties Ltd. | Materials | Precious Metals & Minerals | Bull | TSX | cash flow, dividends, Gold, inflation hedge, NAV discount, royalties, valuation | Login |
| Oct 16, 2025 | Fund Letters | Bryden Teich | WPM | Wheaton Precious Metals Corp. | Materials | Precious Metals & Minerals | Bull | TSX | AI data centers, Gold, inflation, royalties, Silver, Solar, Streaming | Login |
| Feb 5, 2026 | Fund Letters | Bryden Teich | TIH CN | Toromont Industries Ltd | Industrials | Construction & Engineering | Bull | New York Stock Exchange | aftermarket, CapEx, compounding, infrastructure, machinery, Rentals, ROIC | Login |
| Oct 16, 2025 | Fund Letters | Bryden Teich | OR | Osisko Gold Royalties Ltd. | Materials | Precious Metals & Minerals | Bull | TSX | cash flow, dividends, Gold, inflation hedge, NAV discount, royalties, valuation | Login |
| Oct 16, 2025 | Fund Letters | Bryden Teich | WPM | Wheaton Precious Metals Corp. | Materials | Precious Metals & Minerals | Bull | TSX | AI data centers, Gold, inflation, royalties, Silver, Solar, Streaming | Login |
| TICKER | COMMENTARY |
|---|---|
| CAT | Construction + Mining at low mid-cycle levels; dealer destock largely complete. Non-Residential + manufacturing starts inflecting (manufacturing starts 5X trailing 12-month average in June). Pricing Re-Accelerating, inventories bottoming → classic machinery trough signals. De-Globalization + OBBB tailwinds (bonus depreciation = ~700bps spend tailwind). Five Prior Cycles = ~150% avg alpha vs. S&P 500® Index from trough to peak. |
| TIH.TO | During the year the leading absolute performance contributors were Dollarama, Toromont Industries and Element Fleet Management. |
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